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Basics of formation of contract
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It includes essentials of a contract, the formation of contract, Offer & Acceptance, termination of contract.
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Contract Law Notes - 2These are extra background notes and are not intended to be a substitute
for additional reading from the recommended text. They follow the order of
the powerpoint slides but sometimes have a little more detail.
Termination of the offer
An offer comes to an end when:
i) It is accepted
ii) It is rejected or a counter offer is made by the offeree (see Hyde v Wrench
(1840) below)
iii) The offer lapses through:
a) Time - where no time limit is specified, after a reasonable time
Ramsgate Victoria Hotel Co v Montefiore (1866) L.R.1 Ex.109
b) Death of the offeror or the offeree before acceptance
Death of offeror: an offer ends when the offeror dies and the offeree has
notice of this.
[Background point only Death of offeree: there is no clear authority on this
but Warrington LJ in Reynolds v Atherton 1921 said obiter that the offer
would lapse.]
c) Failure of a condition - express or implied.
Where an offer is made subject to a condition, it will lapse if the condition is
not met.
iv) It is revoked.
An offer can be revoked (withdrawn) by the offeror at any time before
acceptance.- Payne v Cave (1789) 3 Term Rep 148
- but revocation is effective only when it is communicated to the offeree before
acceptance - Byrne v Van Teinhoven (1880) 5 CPD 344
1
, Revocation can be communicated through a (reliable) third party
Dickenson v Dodds (1876) 2 Ch D 463, 34 LT 607 (CA)
An offer to keep an offer open for a specified period can be withdrawn unless an
option has been purchased.
Routledge v Grant (1828) 4 Bing 653
The revocation of offers in unilateral contracts (eg a 'reward' contract)
Problem - How can such a revocation be communicated to people who may have
seen the offer? The problem here is when can an offer be revoked? Generally
with a bilateral contract it can be revoked any time before acceptance
Shuey v USA (1875) 23 L ed 697
How can a revocation be communicated? It was held in Shuey v US that it was
sufficient that..’the same notoriety be given to the revocation as was given to the
offer’. So if the same method of revocation is used as was used to make the offer
(eg a reward poster)- whether an individual offeree has seen this is irrelevant.
When can a unilateral offer be revoked?
Any time before the ‘offeree’ starts performing the act eg before starts looking for
lost dog.
Some cases have suggested that if an offeree starts performing the act required
in the offer that revocation may no longer be made.
2
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